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A History of Corporate Looting

If you want to understand what corporate lobbyists in Washington, D.C., are
trying to foist on us with the pending "stimulus" bill, look back to the first
half of the 1980s.

In 1981, Ronald Reagan pushed a huge tax-cut bill through Congress. For
corporations, it offered an array of new loopholes, centered on super-accelerated
"depreciation" write-offs for equipment and buildings. The results were
staggering, as widespread corporate tax avoidance quickly became routine.

Studies by Citizens for Tax Justice found that half of America's largest and
most profitable corporations were able to avoid paying any income tax at all in
at least one year between 1981 and 1984, with many enjoying multiple zero-tax
years. The list of corporate tax freeloaders was a rogues' gallery of famous
names. General Electric, Texaco, Dow Chemical, PepsiCo, Boeing, and ITT were
among the long list of companies that paid nothing at all in taxes from 1981 to
1984. In fact, these and other companies were actually able to get checks
outright from the U.S. Treasury--by "carrying back" their excess write-offs to
earlier years and getting rebates of taxes paid in the past. Meanwhile, companies
that couldn't take advantage of carrybacks sold their surplus loopholes to other
firms.

The public, and eventually the politicians, found this situation intolerable.
A House Ways and Means Committee report in late 1985 said: "The committee
believes the tax system is nearing a crisis point. Certain tax provisions allow
many corporations to pay relatively little Federal income tax, without
stimulating investment and production as intended." A few months later, the
Senate Finance Committee agreed: "The committee finds it unjustifiable for some
corporations to report large earnings and pay significant dividends to their
shareholders, yet pay little or no taxes on that income to the government."

Even President Reagan got the message. "I just didn't realize that things had
gotten that far out of line," he told Treasury Secretary Donald Regan. So
Congress passed, and Reagan signed, the Tax Reform Act of 1986, which closed the
most egregious loopholes and established a corporate "alternative minimum tax" to
assure that large, profitable companies would pay some significant tax no matter
how many of the remaining tax breaks they were able to employ.

Well, here we are in 2001, and corporate America sees an opportunity to undo
Reagan's 1986 tax reforms. The House-passed "stimulus" bill, endorsed by
President Bush, would reinstate super-accelerated depreciation, at least for the
next three years. It would repeal the corporate alternative minimum
tax--retroactively, back to 1986. And for companies that find themselves with an
excess of tax breaks, it would extend the "carryback" period from the current two
years to five years. This is the same witches' brew that gave us the massive
corporate tax avoidance of the early eighties--which, of course, is exactly what
the lobbyists have in mind.

Although the right wing is happy to name a building and an airport after
Reagan, most are contemptuous of the better parts of his tax legacy. The Cato
Institute, the Heritage Foundation, and other leading rightist leaders are all in
the tank for this fall's corporate-welfare package. Kenneth Kies of
PricewaterhouseCoopers--a former aide to Congressman Bill Archer, the Texas
Republican who tried mightily to derail the bipartisan 1986 tax reforms--condemns
those who oppose new corporate tax breaks as guilty of "astonishing ignorance."
And Grover Norquist, who began his career as a Reagan-administration-sponsored
advocate for the 1986 reform bill, is now enthusiastic in repudiation.

One rare, principled conservative, Bruce Bartlett of the National Center for
Policy Analysis, bemoans that his usual soul mates are "confirming the liberal
caricature of conservative tax policy." But sadly for Bartlett, this fall's
events show once again that no caricaturing is required.